Key witness faces heat in Steinberg insider trading case

NEW YORK Dec 3 The star witness in the
government's case against SAC Capital Advisors portfolio manager
Michael Steinberg faced aggressive questioning on Tuesday from
Steinberg's lawyer, who sought to discredit his earlier
testimony.

Jon Horvath, a former analyst at Steven A. Cohen's SAC hedge
fund, was on his fourth day on the witness stand in Steinberg's
high-profile insider trading trial in a federal court in New
York.

Barry Berke, Steinberg's lawyer, questioned Horvath about
statements he made last week that Steinberg had pushed him to
obtain "edgy" information, at times eliciting seemingly
contradictory answers from Horvath.

Under questioning by Berke, Horvath also testified he
probably did not tell Steinberg specifically that he planned to
"do something illegal" with insider information received from an
analyst at another hedge fund who was feeding him tips.

"I don't think I ever explicitly told him I was going to
commit a crime," Horvath said.

The statements provided signs of weakness in the
government's case after three and a half days in which Horvath
testified Steinberg pushed him to get inside
information.

The cross-examination is set to continue on Wednesday and
Horvath is expected to remain on the stand into Monday.

Horvath, who has pleaded guilty and is cooperating with
prosecutors, is considered a key link in the government's case
against Steinberg, the highest-level employee at the hedge fund
to face criminal charges over alleged insider trading.

Steinberg, 41, is charged with five counts of securities
fraud and conspiracy to commit securities fraud on charges he
traded in Dell Inc and Nvidia Corp based on
insider information supplied by Horvath. He denies wrongdoing.

He is the first SAC employee to face trial. The hedge fund
agreed last month to plead guilty to fraud charges and pay $1.2
billion as part of the government's probe of insider
trading.

'EDGY' INFORMATION

Much of Berke's questioning Tuesday centered on a meeting in
SAC's New York offices at which Steinberg, following a bad bet
in 2007 based on Horvath's recommendation, encouraged him to
cultivate sources with information on public companies.

In testimony last week, Horvath said Steinberg told him:
"What I need you to do is get edgy, proprietary, market-moving
information so we can use it to make money on these stocks."

Under questioning by Berke on Tuesday, Horvath initially
said the meeting occurred a couple days after the bad trade took
place. But Berke subsequently showed him several emails
indicating Horvath was traveling to Taipai, Hawaii and San
Francisco up until the new week following the trade going sour.

Asked by Berke if Horvath stood by his testimony, Horvath
said he may have been wrong about the dates.

"Or that the conversation ever took place, isn't that true,
sir?" Berke said, drawing an immediate objection from the
prosecution that the judge sustained.

OTHER TRADING

While the case against Steinberg has focused primarily on
trades in Dell and Nvidia, earlier on Tuesday Horvath told a
government lawyer he also shared insider tips about other
companies with Steinberg, including Intel Corp, Sun
Microsystems Inc and Hewlett-Packard Co.

Horvath said the tips on Sun Microsystems came from a former
business school and skiing friend, Davide Pacchini, who worked
at Sun in at the time.

A LinkedIn profile for Pacchini shows he worked from 2001 to
2008 in corporate operations and business development at Sun
Microsystems, which was acquired by Oracle Corp in
2009.

Horvath said he shared information gathered from Pacchini
with Steinberg. A trade in Sun Microsystems by Steinberg in
2008, after Horvath received a tip from Pacchini, helped net
more than $1 million in trading profits, he said.

In at least one instance, Horvath testified to sending a
recommendation to invest in Sun to an email account called
"Steve Ideas" that was used to funnel trading recommendations to
Cohen himself.

In an Oct. 30, 2007, email to the Cohen account, Horvath
wrote: "My edge is contacts at the company and their
distribution channel."

Horvath sent a separate email with the same text to Andrew
Lester, the head of Sigma Capital. Lester replied, copying in
Steinberg and telling Horvath to "keep it up!"

The email prompted Steinberg to respond separately, without
Horvath on the chain: "I suspect the line about contacts at the
company may wake up our legal eagles."

Steinberg added that "fortunately," Horvath's Sun "guys
don't actually work there anymore." But Horvath said on Tuesday
that was "false," since Pacchini was employed at Sun at that
time.

Pacchini did not respond to requests for comment. A
spokesman for Oracle declined to comment.

The case is U.S. v. Steinberg, U.S. District Court, Southern
District of New York, No. 12-cr-00121.